Full Steam Ahead: Factory Orders Hit Record High
The U.S. Census Bureau, together with the Department of Commerce, on Monday issued its full report on durable and nondurable manufacturing for November. Following a downwardly revised contraction of 0.5 percent in October (from -0.9 percent), factory orders increased 1.8 percent on the month in November to $497.9 billion, the highest level on record for the NAICS system.
The total value of new orders placed over the past few months has returned to and exceeded pre-crisis levels, but the growth has largely been driven by new orders for transportation equipment — specifically commercial aircraft — which is subject to volatile demand. Case in point, new orders for transportation equipment increased 8.3 percent on the month in November to $81.1 billion. Although transportation equipment only accounted for about 16.3 percent of total new orders, it accounted for about 70 percent of the month-to-month growth. Excluding the segment, new orders for manufactured goods increased just 0.6 percent on the month.
But the data are still enormously encouraging, echoing a positive tone set by manufacturing purchasing managers indexes for the fourth quarter.
Two headline indexes maintained by the Institute for Supply Management and Markit Economics showed that manufacturing conditions are generally strong and appear to be getting better. Each PMI is determined by conducting a survey of industry executives; a reading above 50 indicates growth.
The ISM Manufacturing Report on Business showed a 0.3 percentage point decline in its headline PMU, from 57.3 to 57, indicating slightly slower growth in December than in November. The index was weighed down by inventories, which actually contracted in December, and exports, which slowed down but still showed growth. Importantly, though, new orders increased, indicating ongoing healthy demand for manufacturing goods.
Markit’s U.S. Manufacturing PMI climbed 0.3 percentage points to 55, an 11-month high, indicating accelerating growth in manufacturing. The highly watched output component of the index climbed 0.1 percentage point to 57.5. The new orders component fell 0.1 percentage point to 56.1.